Long Read: Collaboration and risk-sharing needed to revitalise Norwegian oil and gas exploration
Supporting Long Read for the brief opinion article in the Norwegian business newspaper Dagens Næringsliv, both pieces by Tim Dodson, former exploration manager in Equinor and Sidsel Lindsø, exploration expert and owner of the consultancy company ExploCrowd.
Original opinion piece in DN: Last chance for exploration in Norway?
Follow-up article by journalist Morten Ånestad in DN: Link to Dagens Næringsliv
Photo credit for Tim Dodson: Litta-Victoria Udod and photo credit for Sidsel Lindsø: Anne Lise Norheim
Background:
Norway’s Government Pension Fund Global has largely been built on revenues from the country’s oil industry, which in turn has been developed by exploration departments and geologists with specialised expertise. Recent developments give cause for concern: will exploration activity be sufficient to sustain the industry – and the value creation it generates?
If exploration activity continues at its current level, we will face a situation as early as 2028 with low production levels and correspondingly low value creation – with significant consequences for employment, state revenues, and Norway’s contribution to European energy security.
As members of the Norwegian Petroleum Society’s jury for the ‘Exploration Revived Award,’ we have analysed the current challenges. We also propose solutions that we believe can ensure sustainable exploration activity on the Norwegian continental shelf in the years ahead.
Key challenges:
High exploration activity – but small discoveries
Despite analyses from the Norwegian Offshore Directorate indicating significant undiscovered oil and gas volumes on the Norwegian continental shelf, results over the past decade have been weak. A large proportion of exploration wells focus on infrastructure-led exploration (ILX), which generally results in small discoveries.
Recent drastic decline in Return on Investment (ROI)
Norwegian exploration activity has seen a negative economic trend. The value of oil and gas discoveries in 2024 barely covers the cost of finding them. In previous years, ROI was at three, and at the time of the Johan Sverdrup discovery, it was as high as five, according to Wittemann E&P Consulting. With significant rising costs and reduced margins, it is becoming increasingly difficult for companies to justify investments in exploration.
Weakened exploration environments in the industry
The number of companies operating on the shelf has decreased, and many of those remaining have deprioritised exploration in favour of production and development.
How did we get here?
Today’s situation is the result of various market and political factors. In the early 2000s, the Norwegian continental shelf was characterised by low activity and few players, but this changed with the introduction of the exploration tax refund scheme in 2005. This scheme, combined with rising oil prices, led to a boom in mid-sized and large exploration players, which contributed to significant discoveries and value creation.
Following this period of success, several challenges arose with major consequences for Norway’s exploration environment:
The rise of US shale oil production caused a global drop in oil prices in 2014. Combined with rising costs, this led to downsizing and cuts in exploration activity. The number of companies on the Norwegian shelf fell from 53 to around 30, and up to 80% of exploration geologists lost their jobs during the period of 2020.
The Covid-19 pandemic in 2020 further weakened the exploration sector. To maintain activity levels, a temporary tax scheme was introduced, but at the same time, the exploration refund scheme was abolished. As a result, smaller exploration players prioritised acquiring producing fields rather than drilling new exploration wells because they desperately needed to get back into tax position to survive. The industry’s focus shifted from exploration to production.
The result is that the vast majority of today’s exploration is taking place in known areas close to existing, ageing infrastructure – a strategy that only provides short-term gains.
Of the 24 companies currently active on the Norwegian shelf, not all are engaged in exploration. In a few years, discoveries will be too small to sustain jobs and maintain production. It is akin to withdrawing money from a bank account without making any new deposits.
This trend must be reversed – and urgently.
If we are to secure long-term value creation and energy supply, we must do more than explore the same areas. This requires collaboration, investment in testing more daring exploration concepts, and strengthening of expertise.
Three measures to revitalise Norwegian exploration:
1. Broad industry collaboration
The industry must work more closely together to share the risks and costs associated with exploration. This could include establishing consortia that share both financial commitments and expertise.
We also encourage government participation and initiatives through Petoro. Lessons can be drawn from the exploration refund scheme, which demonstrated that with the right incentives, a diverse range of companies can be attracted to exploration.
2. A national drilling programme to test new exploration models
The current exploration models tested are too narrow. To avoid long-term consequences of the too many small discoveries lately, we must think bigger and more strategically. We need new mid-sized and large discoveries – and these will likely be found in underexplored play models and different reservoir types than the traditional ones explored these years.
Through a dedicated and extensive drilling programme, we can assess the full resource potential of the Norwegian continental shelf. Our estimate is that around 20 wells are needed before any conclusions can be drawn.
This initiative is time-sensitive. If action is delayed, critical infrastructure will become obsolete or be decommissioned, making it even more commercially challenging to develop potential new discoveries.
3. Re-establishing exploration departments
It is essential to rebuild strong exploration environments where exploration-minded geologists can apply their skills to develop ideas, unconventional play models, and build concepts that can be tested.
We hope this analysis will contribute to a broader discussion – and to action from both industry and government. The question is no longer whether we should act, but how quickly we can do so.
Sources:
ROI for exploratoin per year: unpublished analysis for NPF Exploration Revived Award 2025 committee by Wittemann E&P Consulting.
Number of companies: data from Norwegian Offshore Directorate Fact Pages
Exploration wells: statistics from Norwegian Offshore Directorate Fact Pages
Discovered volumes of oil and gas in m3 boe: published at norskpetroleum.no
Brent oil price: EIA - US Energy Information Administration eia.gov